Ans: Industrial Policy 1991. This policy
opened up the Indian economy.

(c) Budget is a quantitative expression. (Write True or False) 1

Ans: True

(d) Name the organisation which regulates the
working of banks in India. 1

Ans:
RBI

(e) Name one
method of on the job training. 1

Ans:
Job Rotation

(f) Give the full form of SEBI. 1

Ans:
Securities and Exchange Board of India

(g) Name one
feature of a good control system. 1

Ans:
Suitability

(h) Name one
external source of recruitment. 1

Ans:
Direct recruitment

2. What is ratio analysis? 2

Ans: It
refers to analysis of financial statements by calculating various types of
ratios. Some of the important ratios are current ratio, liquid ratio, debt-equity
ratio, proprietary ratio, profitability ratios. These ratios help in knowing
the operating efficiency and financial position of the company.

3. State two objectives of NSE. 2

Ans:National Stock Exchange of India was
established in 1992 and started working in 1994. The main objectives of NSE was
stated below:

a)
To ensure equal access to investors all over the world.

b)
To provide fair, efficient and transparent trading of the securities
electronically.

c)
To provide facilities of international standards.

4. Write two differences between advertising and personal selling. 2

Basis

Advertising

Personal Selling

Form

These
are Personal.

These
are impersonal.

Message

These
are uniformity of message which means that the message is the same for the
entire customer.

This
message has no uniformity which means it can be changed keeping in view the
behavior of the customer.

Flexibility

It
lacks flexibility.

It
is completely flexible.

Cost

It
is relatively less costly method.

These
are a most costly method.

5. Give two differences between capital market and money market. 2

Ans:
Difference between capital market and money market

Basis ofDistinction

Capital Market

Money Market

1)Period

Capital
market is a market for medium and long term funds.

Money
market is a market for short term funds.

2)Constituents

These
include new issue market, stock market, stock brokers and intermediaries.

These
include call money market, bill market and discounting market.

6. Explain two rights given to consumers under the Consumer Protection Act,
1986. 2

Ans: Rights of
Consumers:

a)The right to
safety: It refers to the right
to be protected against products which are hazardous to health or life.

b)The right to be informed: Consumers have a right
to be informed about the quality, quantity and price of goods or services so
that they can make the right decision.

c)The right of choice: The consumer has the right to be
assured of a choice of various goods and services of satisfactory quality and
competitive price.

7. Explain the concept of Taylor’s Differential
Piece Rate system. 3

Ans: This scientific technique of
differential wage rate system emphasises on paying different rate of wage for
efficient and inefficient employees. To conduct differential wage rate system
Taylor suggested that the company must fix a standard rate of wage for workers
producing standard output. The workers who produce more than the standard
target must be paid with a higher rate of wages as compared to those who are
producing less than standard.

8. (a) Define Organisation as a group activity. 3

Ans:
Every enterprise is created with a specific purpose. Based on this, the
activities involved can be identified. Once activities are identified, then
they need to be grouped. They are grouped in different ways. The activities
which are similar in nature can be grouped as one and a separate department can
be created. For example – activities undertaken before sale of a product,
during the sale of the product and after the sale of the product can be grouped
under the functions of a marketing department. Normally, all activities of a
manufacturing unit can be grouped into major functions like purchasing,
production, marketing, accounting and finance, etc. and each function can be
subdivided into various specific jobs.

Or

(b) Discuss the types of Organisation structure. 3

Ans: There
are Types of Organisational Structure

a) Functional Structure: Functional organisation is a type of
organisation in which the work of the whole enterprise is divided into a number
of specialized functions like production, purchasing, marketing, office
management, personnel relations, etc. and each of these specialised functions
is entrusted to a functional expert or specialist.

b) Divisional Structure: When
the organisation is large in size and is producing more than one type of
product then activities related to one product are grouped under one
department. This type of organisation is called divisional structure
organisation. In divisional structure all activities associated with a product
or line can be easily co-ordinated.

9. (a) Discuss the objectives of financial planning. 3

Ans: Objectives
of Financial Planning: Financial planning is done to achieve the
following two objectives:

1.To ensure availability of funds whenever these are required: The main
objective of financial planning is that sufficient fund should be available in
the company for different purposes. It ensures timely availability of finance.

2.To see that firm does not raise resources unnecessarily:Excess
funding is as bad as inadequate or shortage of funds. If there is surplus
money, financial planning must invest it in the best possible manner.

3. To help in fixing most appropriate
capital structure: If appropriate capital structure is not
designed then it will create a problem of liquidity for the company. one of the
aims of financial planning is to assist the management in designing appropriate
capital structure.

Or

(b) Define current assets. Give two examples of current assets.2+½+½=3

Ans: Current Assets
are assets held on a short-term basis normally for one year. These assets are
used in day to day business activities. Examples:
Debtors (accounts receivable), bills receivable (notes receivable), stock
(inventory), temporary marketable securities, cash and bank balances.

10. (a) Who can file a complaint before a consumer court? 3

Ans:A complaint before an appropriate consumer
forum can be made by complainant who can be:

a)Any consumer,

b)Any registered consumer association,

c)Central/state govt.,

d)One or more consumer on behalf of many consumer having same
interest,

e)Legal representative of deceased consumer within two years.

Or

(b) Briefly discuss three important features of entrepreneurship. 3

Ans:
Features of Entrepreneurship:

a)Entrepreneurship
is the practice of starting new organizations, particularly new businesses
generally in responses to identified opportunities.

b)Entrepreneurship
ranges in scale from solo projects to major undertakings creating many job
opportunities.

c)It is a risk
bearing practice.

11. (a) Explain any three factors
affecting pricing of a product. 3

Ans: Factors determining Fixation of price:

i)
Cost of the product: Cost of the product is the main component of the price. No
company can sell its product or service at less than the cost of the product. A
Fixed and variable cost are to be considered for determining the price.

ii)
The utility and demand for the product: Intensive study for the demand for
product and service in the market is to be undertaken before the fixation of
the price of the product. If demand is relatively more than supply, higher
price can be fixed.

iii)
Extent of competition in the market: It is necessary to take into consideration
prices of the product of the competing firms prior to fixing the price. In case
of cut throat competition it is desirable to keep price low.

Or

(b) Write any
three merits of Internal recruitment. 3

Ans: Advantages
of Internal Source of Recruitment:

a)Job
Security: It creates a sense of security among employees when they are assured
that they would be preferred in filling up vacancies.

b)Motivation:
It motivates the existing employees, for they are assured of the fact that they
would be preferred over outsiders when vacancies occur. It gives the scope of
development for existing employees of the organisation.

c)Improved
Commitment: It promotes loyalty and commitment among employees due to sense of
job security and opportunities for advancement.

12. Define management and discuss its
objectives.2+3=5

Ans: Ans:
Management is the coordination of all resources through the process of
planning, organizing, directing, staffing and controlling in order to attain
stated objectives effectively and efficiently.Effectively means doing the right task, completing activities and
achieving goals and efficiently means to attain objectives with least amount of
resources at a minimum cost.

According
to Modern concept “Management is a process of getting things done with the aim
of achieving goals effectively and efficiently.”

According
to Marry Parker Follett, “Management is an art of getting things done through
others and with formally organised groups."

Objectives
of management are divided into four main categories which are stated below:

1)
Organisational Objectives: Organisational objectives refer to high priority or
core objectives which are essential for the existence of an organisation. These
objectives aim at the prosperity and growth of the organisation.

2)
Social Objectives: Management is not only a representative of the owners and
employees but is also responsible towards various groups outside the
organisation such as consumer, government, creditors etc.

3) Personal or individual objectives: These objectives are related
to the employees of the organisation. Employees are the most important
resources of every company and satisfied and motivated employees contribute
maximum for the organisations.

4) General objectives: Besides the above mentioned main
objectives, management tries to achieve the following several objectives:

a) Maximum prosperity for employer and employees.

b) Human betterment and social justice.

c) Economic development and growth.

13. Explain the impact of Economic
Reforms on Business and Industry. 5

Ans:
Liberalisation and Globalisation of Indian economy through industrial policy
change in 1991 have created both challenges and opportunities for the Indian
business. Impact of Government Policy Changes on Business and Industry
(Significance of liberalisation and globalisation) can be studied under the
following heads:

a)Increasing
competition: As a result of changes in the rules of industrial licensing and
entry of foreign firms, competition for Indian firms has increased especially
in service industries like telecommunications, airlines.

b)More
demanding customers: Customers today have become more demanding because they
are well-informed. Increased competition in the market gives the customers
wider choice in purchasing better quality of goods and services.

c)Rapidly
changing technological environment: Increased competition forces the firms to
develop new ways to survive and grow in the market. New technologies make it
possible to improve machines, process, products and services.

d)Necessity
for change: In a regulated environment of pre-1991 era, the firms could have
relatively stable policies and practices. After 1991, the market forces have
become turbulent as a result of which the enterprises have to continuously
modify their operations.

e)Threat
from MNC: Massive entry of
multi-nationals in Indian marker constitutes new challenge. The Indian
subsidiaries of multi-nationals gained strategic advantage. Many of these
companies could get limited support in technology from their foreign partners
due to restrictions in ownerships. Once these restrictions have been limited to
reasonable levels, there is increased technology transfer from the foreign
partners

14. (a) Discuss the Elements of Delegation. 5

Ans: Elements of Delegation of Authority:

a) Responsibility: Responsibility means assigning the work
amongst subordinates. The process of delegation begins when manager divides his
work among different individuals. This is also known as entrustment of duties. Duties
can be divided into two parts: one part, that the individual can perform himself
and the other part, that he can assign to his subordinates to perform.

b) Authority: Authority means power to take decision. To carry on the
responsibilities every employee needs to have some authority, so, when managers
are passing their responsibilities to the subordinates, they also pass some of
the authority to the subordinates.

c) Accountability: To make sure that his subordinates perform all
works effectively and efficiently the manager creates accountability.
Accountability means subordinates will be answerable for the non-completion of
the task. It is the third and final step of delegation process.

Or

(b) Distinguish between delegation and
decentralisation of authority.5

Ans: Difference between Delegation of
Authority and Decentralisation .

Basis

Delegation of Authority

Decentralisation

Meaning/Name

Sharing
of the task with the subordinate and granting authority in a prescribed limit
by the superior is Delegation.

The
systematic delegation to the lowest level of management is called
decentralization.

Nature

It
becomes compulsory in all the organizations as the complete task cannot be
performed by the superior.

It
becomes compulsory in the large organisations.

Freedom
in action

Less
freedom to the subordinate Final authority lies with the delegator.

More
freedom given to the subordinate.

Status

This
is a process done as a result of Division of work.

This
is the result of the policies framed by higher officials.

Scope/Authority

It
depicts limited distribution of work, so has a limited scope.

It
depicts broader distribution of authority so has a wider scope.

Purpose

Its
purpose is reduction of workload of the officer.

The
purpose is expansion of the authority in the organization.

15. Discuss the features of
liberalisation. 5

Ans: Features of Liberalisation:

a)The
industry is given freedom of producing and distributing the goods and services.

b)Freedom
in deciding the scale of business activities.

c)No
restriction on fixation of the prices of goods services.

d)Removing
unnecessary controls over the economy.

e)Removing
unnecessary control over the economy through delicensing.

16. Analyse the steps involved in the
staffing process of an organisation.5

Ans: Steps
involved in Staffing Process:

1)Enumerating man power requirement: Staffing process begins with
the estimation of man power requirement which means finding out number and type
of employees need by the org. in future.

2)Recruitment: After man power planning, the manager tries that more
and more people should apply for the job so that the org. can get more choice
and select better candidates.

3)Placement and Orientation: Placement refers to placing the right
person on the right job for which he is selected. Orientation refers to
introducing the new employees with the existing employees.

4)Selection refers to choosing the most suitable candidate to fill
the vacant job position. It is a negative process because a number of
candidates are rejected under it.

5)Training and Development: The process of training helps to improve
the job knowledge and skill of the employees. Training and Development not only
motivate the employees but these improve efficiency of work also.

6)Performance Appraisal: At this step the capability of the
employees is judged and for that his actual work performance is compared with
the work assigned to him. Performance and career planning: It is a process
through which employees get better salary, status, position and also get
promotion to higher post.

7)Compensation: For deciding the compensation the works are
evaluated. Compensation must be reasonable and related with the work.

17. (a) What do you mean by responsibility centres? Discuss any three types of responsibility
centres. 2+3

Ans:
Responsibility Centre: A responsibility centre is a unit of an organisation which
has its own its own goals and objectives, working staff, policies and
procedures in addition to the organisation goal. It is headed by a manager who
is responsible for revenue generated, expenses incurred and funds invested.

Responsibility
centre is of various types which are stated below:

Cost
Centre: A large business is divided into a number of functional
departments (such as production, marketing and finance) for administrative
convenience. These departments are further divided into smaller divisions for
cost ascertainment and control. These smaller divisions are called cost
centers. A cost centre is a location, person or item of equipment (or group of
these) in relation to which cost can be ascertained and controlled. In simple
words, it is a subdivision of the organization to which cost can be charged.

Revenue
Centre:A revenue centre is a unit of
the organisation which is mainly responsible for generating sales revenue. Manager
of revenue centre do have control over cost, investment of funds but usually has
control marketing expenses. Actual revenue is compared with budgeted revenue and
actual marketing expenses with budgeted marketing expenses to evaluate the
performance of revenue centre.

Profit
Centre:A profit centre is a unit of
the organisation whose manager is responsible for both generating revenues and
costs. The primary responsibility of manager of a profit centre is to make decisions
that affect both costs and revenues (and thus profits) for the department or
division. Maximisation of profit is the primary aim of a profit centre.

Or

(b) Discuss the traditional techniques of
management control. 5

Ans: Techniques of Control or Methods of
Establishing Control

A
number of techniques or tools are used for the purpose of managerial control.
Some of the techniques are used for the control of the overall performance of
the organisation, and some are used for controlling specific areas or aspects
like costs, sales, etc. The various techniques of control can be classified
into categories, viz.

1.
Direct Supervision and Observation: 'Direct Supervision and Observation'
is the oldest technique of controlling. The supervisor himself observes the
employees and their work. This brings him in direct contact with the workers.
So, many problems are solved during supervision. The supervisor gets first hand
information, and he has better understanding with the workers.

2. Budgetary Control: Abudgetis a
planning and controlling device. Budgetary control is a technique of managerial
control through budgets. It is the essence of financial control. Budgetary
control is done for all aspects of a business such as income, expenditure,
production, capital and revenue. Budgetary control is done by the budget
committee.

3.
Break Even Analysis: Break-even analysis is a simple control tool. Break Even Analysis
or Break Even Point is the point of no profit, no loss. The Break-even analysis
acts as a control device. It helps to find out the company's performance. So
the company can take collective action to improve its performance in the
future.

18. (a) Explain the main elements of marketing mix. 5

Ans: 4 P’s of Marketing Mix:

1. Product: Product
is one of important part of marketing mix because it reflects the good or bad
reputation of any organization. The products represent any business
efficiently. Successful organizations always search out the buying habits
of their customers and designed their products based on those buying habits in
order to meet the customer’s requirements. They also design their products
based on important factors such as purchasing power and geographical locations
etc.

2.
Price: It is the worth of product on which customers are agreed to buy
the products. Price of the product should be according to the range of
regular customers. Prices are fluctuating according to seasonal
requirements. Marketers always try to satisfy their clients at any cost.

3.
Place: Products always design based on geographical place because
customers buy products according to their traditions and seasons.
Companies which are going to spread their business networks throughout
the world must visit the place where they want to open their branches. They
need to study the traditions and seasonal changes of the country where they
want to initialize their products.

4.
Promotion: Promotion activities involve marketing and advertising.
Promotional activities are used to create awareness about the products.
Customers know about products and their specification through social
marketing media. Companies adopt social marketing media in order to create
awareness about their products and services. Promotional activities and
techniques are important if companies initialize new products or make some
changes in product’s specifications. Promotional activities include
advertising, selling, public relations and sales promotions.

Or

(b) Discuss the factors influencing pricing. 5

Ans: Price is defined as the amount we pay for goods or a service or an
idea. Price is the only element in the marketing mix of a firm that generates
revenue. The term ― Price need not be confused with the term ― Pricing. Price
is the value that is put to a product or service. But pricing is different from
price. It refers to decisions related to fixing of price of a commodity. A
pricing strategy takes into account segments, ability to pay, market
conditions, competitors price etc while fixing price. It is targeted at the
defined customers and against competitors.

Factors determining Fixation of price:

i)
Cost of the product: Cost of the product is the main component of the price. No
company can sell its product or service at less than the cost of the product. A
Fixed and variable cost are to be considered for determining the price.

ii)
The utility and demand for the product: Intensive study for the demand for
product and service in the market is to be undertaken before the fixation of
the price of the product. If demand is relatively more than supply, higher
price can be fixed.

iii)
Extent of competition in the market: It is necessary to take into consideration
prices of the product of the competing firms prior to fixing the price. In case
of cut throat competition it is desirable to keep price low.

iv)
Government and Legal Regulation: If the price of the commodity and service is
to be fixed as per the regulation of the govt., it should also be borne in
mind.

v)
Pricing objective: Usually at the time of price fixation a certain amount of
profit is added to the cost of the product. Objective is to earn higher profit,
it may it may add amount of it.

vi)
Marketing method used: - Price also influenced by the marketing method used by
the company. Example – Commission which is to be paid to the middlemen for the
sale of the goods is also added to the price.

19. (a) Discuss the contributions of Taylor and Fayol in the context
of management. 8

Ans:
CONTRIBUTION OF F.W. TAYLOR

F.W.
Taylor is one of the founders (the other two are Max Weber and Henry Fayol) of
classical thought/classical theory of management. He suggested scientific
approach to management also called scientific management theory. Frederick
Winslow Taylor well-known as the founder of scientific management was the first
torecognize and emphasis the need for adopting a scientific approach to
the task of managing anenterprise. He tried to diagnose the causes of
low efficiency in industry and came to theconclusion that much of waste
and inefficiency is due to the lack of order and system in themethods
of management. He found that the management was usually ignorant of the amount
ofwork that could be done by a worker in a day as also the best method
of doing the job. As aresult, it remained largely at the mercy of the
workers who deliberately shirked work. Hetherefore, suggested that
those responsible for management should adopt a scientific approachin
their work, and make use of "scientific method" for achieving higher
efficiency. The scientificmethod consists essentially of:

a)Observation

b)Measurement

c)Experimentation and

d)Inference.

He
advocated a thorough planning of the job by the management and emphasized the
necessity of perfect understanding and co-operation between the management and
the workers both for the enlargement of profits and the use of scientific
investigation and knowledge in industrial work. He summed up his approach in
these words:

a)Science, not rule of thumb

b)Harmony, not discord

c)Co-operation, not individualism

d)Maximum output, in place of restricted output

e)The development of each man to his greatest efficiency and
prosperity.

Contribution of Henry Fayol

Henry
Fayol (1841-1925): was a Frenchman with considerable executive
experience who focused his research on the things that managers do. He wrote
during the same period Taylor did. Taylor was a scientist and he was managing
director of a large French coal-mining firm. He was the first to envisage a
functional process approach to the practice of management. His was a functional
approach because it defined the functions that must be performed by managers.
It was also a process approach because he conceptualized the managerial job in
a series of stages such as planning, organizing and controlling. According to
Fayol, all managerial tasks could be classified into one of the following six
groups:

He
pointed out that these activities exist in every organization. He focused his
work on the administrative or managerial activities and developed the following
definition:

• Planning meant developing a course of
action that would help the organization achieve its objectives.

• Organizing meant mobilizing the
employees and other resources of the organization in accordance with the plan.

• Commanding meant directing the
employees and getting the job done.

• Coordinating meant achieving harmony
among the various activities.

• Controlling meant monitoring
performance to ensure that the plan is properly followed.

Or

(b) Discuss the significance of the principles of
management. 8

Ans: Management principles are needed for the following reasons:

a)Optimum use of resources: The management principle of “science, not rule
of the thumb” suggests that every task should be done with
minimum effort and energy and additional work can be done with the saved
energy. By saving time, efforts and energy activities can be made economical
and enhance the productivity of the resources.

b)Change in technology: The management principle of “division of
labour” helps management in identifying in which activity
technology has changed. If there is no division of labour then confusion may
prevail about what and how much to change.

c)Effective Administration: The principle of ‘scalar chain’ helps
the enterprise to communicate with people at different levels. ‘Unity of
direction’ removes confusion in minds of employees; and ‘Unity of command’ avoids
dual subordination. The knowledge of principles improves the understanding of
managers about the ways and means of managing an organization. Management
principles are helpful in taking decisions and handling situations arising in
course of management.

d)Helps in thoughtful decisions
making. Management principles help in thoughtful decision-making. They emphasize
logic rather than blind faith. Management decisions taken on the basis of
principles are free from bias and prejudice.

e)Fulfilling social responsibilities: A business is a creation of society
and makes use of resources of society so it must do something for society.
Management principles guide the managers to perform their social
responsibilities.

f)Direction for training of managers. The
principles are helpful in identifying the areas of management in which existing
and future managers should be trained. The principles of management help the
universities and professional institutes to impart teaching and training in the
theory and practice of management.

g)Role of management. The principles focus
on matters on which greater managerial attention is required. Principles act as
ready reference for the managers to check whether their decisions are
appropriate or not.

Ans: Coordination is defined as the process of bringing about unity and
harmony of functioning amongst the various elements of an organisation.In the words of Henry Fayol, ”To co-ordinate
is to harmonise all the activities of a person in order to facilitate its
working and its success.”

Importance of coordination

Co-ordination
is essential at every level of management for achieving harmony of individual
efforts. Where sub-division and departmentalization is essential, co-ordination
is all the more important. The important benefits of co-ordination are stated
as follows:

1.Good
Personnel Relations: Management and staff create
cordial human relations through co-ordination. The points of dispute or
conflict among different can be settled by mutual discussions.

2.Unity of
Direction: Coordination helps in creating
unity of direction. Different segments of the business may set different goal.
The coordination process helps in synchronizing various efforts. It motivates
various employees to view their work from the standpoint of the business.

3.Efficiency
and Economy: Coordination promotes efficiency
and economy in the organisation. By coordinating activities the efficiency is
brought in the working. It also helps in avoiding delays and eliminating
duplication of efforts.

4.Size and
geographical coverage: An
organisation of large size has greater chances of conflicts and requires
coordination at each level. Similarly, organisation having several units,
departments and branches located at different places need to be balance and
harmonise.

5.Helpful in
Developing and Retaining of Personnel. Co-ordination
by synchronizing various activities helps in promoting team spirit among
organisational personnel. There will be no conflict or confusion in division of
work and everybody will try to improve his own performance.

6.Coordination is an Essence of Management: Coordination, no doubt is the essence of management because all
the managerial functions cannot be completed without proper coordination. It
makes coordination as the soul of managerial operations. The significance of
co-ordination can be verified by the fact that management experts such as Henry
Fayol, R.C. Davis and Allen regard co-ordination as separate function of
management. Coordination aims at creating harmonious relationship between
departments, employees, manager and between workers and management. Effective
coordination results in unity of action, Inspite of individual differences.

Or

(b)
“Management is
considered to be both an Art and Science”. — Explain. 8

Ans: Management As a Science: Science is
defined as a systematized body of knowledge and it uses scientific methods of
observation measurement, experimentation etc. Science may be normative and
positive both. Its principles are exact and university applicable. Similarly,
Management has systematized body of knowledge and its principles are evolved on
the basis of observation and are applicable universally. Management is also
considered as a science since it is based on certain definite principles and
particular methods are applied to solve various problems before the management
personnel. But at the same time it should also be born into mind that
management cannot be given the place of science like Physics, Chemistry etc. It
is not as true and full of facts as the natural sciences are in their subject
matter. There are several reasons which do not allow management to be
considered as pure science. These are:

b)Modified plans and policies: Unlike science, managers are deals with government, employees, customers etc. who
are human beings and it is not possible to hold human beings constant and any
prediction about these factors is impossible.

c)Based on imaginary considerations: Management principles and concepts are based on imaginary
considerations like human behaviour, etc. Its principles when executed do not
provide exact results.

d)Incomprehensive: Various
managerial techniques are new and not known to each and every manager due to
lack of proper training. A manager prefers other ways to solve managerial
problems.

Management As an Art: Art refers to the way of doing
specific things i.e. it indicates “how an objective is to be achieved. It is
the skill and ability to achieve the desired results.Art is the practical application of skill and
ability guided by certain principles or truths. Management is an art in the
sense that it calls for ability and skill to translate scientific management
knowledge into meaningful practice. The art of management consists in
understanding the diverse managerial and organisational situations and in
applying relevant management concepts and methods to the practical realities.
Managers have to be creative and innovative in their thinking and have to rely
on their own previous experience in every situation. Management is also an art
in the sense that management involves blending and balancing diverse interests
and concerns, at a point of time and over a period of time. In short,
Management is considered as an art because of the followings reasons:

a)The process of management involves the use of ability and skills.

b)The process of management is directed towards the accomplishment
of organisational objectives.

c)It is creative in the sense that it is the function of creating
productive situations needed for further improvements.

d)Management is personalized in the sense that every manager has his
own approach to problems.

Management
is both a science as well as an art.The
science of management provides certain principles that can guide managers in
the professional efforts, while the art of management deals with tackling every
situation in an effective manner.Planning and organizing emphasize the science of management while
direction, communication motivation coordination and control emphasize art of
management.Getting work done through
people is an art of management.

21. (a) Why planning is considered to be a primary function of
management? Explain the concepts of policy and rule. 2+3+3=8

Ans:
Planning can be define as “thinking in advance what is to be done, when it is
to be done, how it is to be done and by whom it should be done.” In the words
of Alfred and Beatty,” Planning is the thinking process, the organised
foresight, the vision based on facts and experience that is required for
intelligent action.”

In simple words we can say, planning bridges the gap between
where we are standing today and where we want to reach. Planning is of vital
importance in the managerial process. No enterprise can achieve its objectives
without systematic planning. “Planning
is the heart of management”. It is also considered to be primary
function of management as every activity needs to be planned before it is
actually performed. In other words, planning precedes all other managerial
functions and provides the very basis for organising, staffing, directing and
controlling.

Policies:
Policy can be defined as organisation’s general response to a particular
problem. In simple words, it is the organisation’s own way of handling the
problems. Example: Different
business firms may follow different sales policies as stated below: “We don’t sell on credit”; “It is our policy
to deal with wholesalers only.”

Features
of policies:

a)
Policies are guidelines which facilitate the achievement of predetermined
objectives.

b)
They are general statements.

c) Policies describe what is to be done under
different situations.

d) Policies are less rigid.

Rules:
Rules clearly indicate what is to be done and what is not to be done in
a particular situation. Strict actions can be taken against persons who violate
the rules. Rules are guideline designed to guide behaviour. For e.g., there can
be rule of ‘Keep Silence’ in a library or ‘No smoking’ in a factory.

Features of rules:

a) Rules
are norms regarding behaviour of employees.

b)
Rules are specific statements.

c)
Rules describe what is to be done and what is not to be done by the employees.

d)
Rules are very rigid.

Or

(b) What is meant by planning? Discuss the steps
involved in the planning process. 3+5=8

Ans:
Planning can be define as “thinking in advance what is to be done, when it is
to be done, how it is to be done and by whom it should be done.” In simple
words we can say, planning bridges the gap between where we are standing today
and where we want to reach.

In
the words of Alfred and Beatty,” Planning is the thinking process, the
organised foresight, the vision based on facts and experience that is required
for intelligent action.”

Planning Process: The development of
goals, strategies, task lists and schedules required to achieve the objectives
of a business is called planning process. This process is a fundamental
function.

Steps
in the Process of Planning

1.Setting organizational objectives: The
first and foremost step in the planning process is setting organizational
objectives or goals, which specify what the organisation wants to achieve.

2.Developing planning premises: Planning
is concerned with the future, which is uncertain. Therefore, the manager is
required to make certain assumptions about the future. These assumptions are
called premises.

3.Identifying alternative courses of action: Once
objectives are set and assumptions are made, then the next step is to identify
all possible alternative courses of action.

4.Evaluating alternative courses: The
positive and negative aspects of each proposal need to be evaluated in the
light of the objective to be achieved, its feasibility and consequences.

5.Selecting the best possible alternative: This
is the real point of decision making. The best/ideal plan has to be adopted,
which must be the most feasible, profitable and with least negative
consequences. Sometimes, a combination of plans may be selected instead of one
best plan.

6.Implementing the plan: Once
the plans are developed, they are put into action. For this, the managers
communicate the plans to all employees very clearly and allocate them resources
(money, machinery, etc.).

7.Follow-up action: The managers
monitor the plan carefully to ensure that the premises are holding true in the
present condition or not. If not, adjustments are made in the plan.

22. (a) Define financial management. What are the objectives of
financial management? 2+6=8

Ans: Ans:
Business Finance or Financial management refers to that part of the management
activity which is concerned with the planning, raising, controlling and
administration of the funds used in the business. Its main objective is to use
the funds of the business in the most appropriate way.

In
simple words we can say financial management refers to “Efficient acquisition
of finance, efficient utilisation of finance and efficient distribution and
disposal of surplus funds for smooth working of company.”

Objectives
of financial management:

Efficient financial management requires
existence of some objectives or goals because judgment as to whether or not a
financial decision is efficient is to be made in light of some objective. The
two main objectives of financial management are:

1) Profit Maximisation:It is traditionally being argued, that the objective of a company
is to earn profit, hence the objective of financial management is profit
maximisation. Each alternative is to be seen by the finance manager from the
view point of profit maximisation. Profit maximization
causes the efficient allocation of resources in competitive market condition
and profit is considered as the most important measure of firm performance.

2) Wealth maximisation: The
second objective of financial management is wealth maximization. The concept of
wealth in the context of wealth maximization objective refers to the
shareholders’ wealth as reflected by the price of their shares in the share
market. Therefore, wealth maximization means maximization of the market price
of the equity shares of the company. The objective of wealth maximization
implies long-run survival and growth of the firm.

In
addition to the above, there are some other objectives of financial management
which are stated below:

a)Financial
management helps in ensuring the regular supply of funds to the related
concern.

b)Financial
management ensures the optimum utilization of funds.

c)It
helps in investing in safe areas, so that the great R.O.I. can be achieved.

d)Financial
management helps in planning a good Financial Structure. There should be
maintained a fair balance between the debt and Equity Capital.

Or

(b) What is capital structure? Mention few factors
that influence capital structure. 2+6=8

Ans:
Capital structure refers to the mix of sources from where long term funds
required by a business may be raised i.e. what should be the proportion of
equity share capital, preference share capital, internal sources, debentures
and other sources of funds in total amount of capital which an undertaking may
raise for establishing its business. In simple words, capital structure means
the proportion of debt and equity used for financing the operations of business
and it is calculated by the following formula:Capital
structure = Debt/Equity.

Following factors are to be considered
before determining capital structure.

1.Cash flow position: If cash flow position of the company is sound,
then debt can be raised and if cash flow is not sound debt should be avoided
and it must employ more of equity in its capital.

2.Interest coverage ratio: It is the ratio that expresses the number
of times the Net profit before interest and tax covers the interest
liabilities. Higher the ratio better is the position of the firm to raise debt.

3.Control: Issue of Equity shares dilutes the control of the
existing shareholders, whereas issue of debt does not as the debenture holders
do not participate in the management. Thus if control is to be retained, equity
should be avoided.

4.Cost of debt: If firm can arrange borrowed fund at low rate of
interest then it will prefer more of debt as compared to equity.

5.Stock market conditions: If the stock market is bullish, the
investors are adventurous and are ready to invest in risky securities. In this
case, equity can be issued even at a premium. Whereas in the Bearish phase,
when the investors become cautious, debt should be issued as there is a demand
for fixed cost security.

6.Regulatory framework: Before determining the capital structure of
a company, the guidelines of SEBI and concerned regulatory authority is to be
considered.

7.Flexibility: Excess of debt may restrict the firm’s capacity to
borrow further. To maintain flexibility it must maintain some borrowing power
to take care of unforeseen circumstances.

8.Tax rate: As interest on debt is treated as an expense, it is tax
deductable. Dividend on equity is the distribution of profit so is not tax
deductable. Thus if the tax rates are high, issue of debt is an attractive
means as it is economical in nature.

About Kumar Nirmal PrasadKumar Nirmal Prasad is the founder and CEO of Dynamic tutorials and Services. Dynamic Tutorials and Services is a Leading Coaching Centre of Tinsukia District. We provide complete coaching for Commerece and Arts stream from Class 12 to Master Degree level. Also we have statrted coaching for various competitive exams like RBB, SSC, UGC - NET, State Level Competitive Exams.